New Ukraine loan likely to cost Europe billions

Financing of a massive new interest-free loan for Ukraine will cost EU member states an estimated €3 billion ($3.5 billion) per year for an indefinite period, a senior EU official told dpa on Friday.

Following eleventh-hour negotiations, EU leaders agreed early on Friday to provide Kiev with €90 billion to meet the country's financial and military needs over the next two years, with Ukraine's funds due to run out in 2026.

However, they failed to agree on using Russian assets frozen under EU sanctions to back the loan, due to legal and financial concerns from Belgium, which hosts the lion's share of the funds.

Instead, member states opted to raise the money by taking on joint debt - a deal that secured the required unanimous backing after Slovakia, Hungary and the Czech Republic were assured they would have no financial obligations linked to the loan.

If Russia does not pay compensation for the damage that the war has done to Ukraine, Russian assets frozen in the EU will be used for repayment.

However, interest payments for the loan will be borne by the EU member states.

The contribution from each member state is based on economic strength, meaning a possible €700 million annually in the case of Germany, Europe's biggest economy, calculations by dpa suggest.

The first interest payments will be due in 2027 and will amount to slightly less than €3 billion as the €90 billion are not to be raised on the capital markets all at once, with Ukraine provided with an initial €45 billion next year, according to the EU official.